Dow industrials and S&P 500 close at new near 19-month highs, while the Nasdaq closes barely higher.
December 16, 2003: 6:47 PM EST
By Alexandra Twin, CNN/Money Staff Writer
NEW YORK (CNN/Money) - A blue-chip rally pushed the Dow and the S&P 500 to almost 19-month highs Tuesday, and also helped the Nasdaq overcome considerable weakness to close in positive territory.
The Dow Jones industrial average (up 106.74 to 10129.56, Charts) gained just over 1 percent, the Standard & Poor's 500 (up 7.09 to 1075.13, Charts) index gained just over 0.6 percent and the Nasdaq composite (up 6.03 to 1924.29, Charts) finished barely higher. The Nasdaq had been as much as 0.5 percent lower in the morning.
The Dow's close was its highest since May 23, 2002, when it ended the session at 10,216.08. The S&P 500's close was its strongest since May 24, 2002, when it ended the session at 1,083.82.
"I think there's a lot of things going on," aid Art Hogan, chief market analyst at Jefferies & Co. "We had some good news from companies like Oracle, great economic data this morning, and you had the market clear two key psychological hurdles recently -- the Dow passing 10,000 and the capture of Saddam Hussein. All of that brings buyers back in for the short term."
No new market-moving economic news is expected Wednesday, although investors will take in a number of earnings reports.
Electronics retailers Best Buy (BBY: Research, Estimates) and Circuit City (CC: Research, Estimates) are due to report before the bell. According to First Call estimates, Best Buy is forecast to have earned 37 cents per share, up from 27 cents a year earlier, while Circuit City is thought to have lost seven cents per share, narrower than the 10 cents per share it lost a year earlier.
A pair of brokerages are expected as well. Bear Stearns (BSC: up $0.95 to $74.50, Research, Estimates) is forecast to have earned $1.80, up from $1.50 a year earlier, while Lehman Brothers (LEH: up $2.16 to $74.56, Research, Estimates) is expected to have earned $1.57, more than double the 69 cents it earned a year earlier.
The Dow closed above 10,000 last week for the first time in more than 18 months. The S&P 500 also closed at new 18-month highs late in the week. Both indexes have been able to extend their gains, due partly to the fact that they have had a less boisterous rally this year than the Nasdaq. As of Tuesday's close, the Dow is up 21.4 percent and the S&P 500 is up 22.2 percent year-to-date.
But after hitting a new 22-month high of 1,989.82 two weeks ago, the Nasdaq has weakened, with investors rotating money out of many of the big technology winners of the year and moving it to some of the sectors that haven't had as much of a run up. The Nasdaq is already up 44.1 percent year-to-date, as of Tuesday's close.
That rotation is likely to continue through the end of the year, said Peter Green, a market analyst with MKM Partners, and with the Nasdaq having led the advance this year, if it continues to underperform in the next few weeks, that's going to limit how much the broader market can gain.
Hogan says that the Nasdaq may make another attempt at 2,000 by the end of the year, but that it is unlikely to close too much higher or lower than where it is now. "The last few weeks of December tend to be more defensive," he added.
On the move
After starting the day negative, market breadth ended up mixed to positive. On the New York Stock Exchange, where 1.5 billion shares changed hands, advancers beat decliners by more than nine to seven. On the Nasdaq, losers edged gainers on volume of almost 1.80 billion shares.
Caterpillar (CAT: up $2.50 to $81.02, Research, Estimates) was the Dow's biggest gainer, adding $2.50, or 3.2 percent, after the equipment maker said that North American sales for the quarter that ended November were up 19 percent from the same period a year earlier.
All in all, 24 out of the 30 Dow components closed higher. Other big gainers included IBM (IBM: up $1.87 to $93.98, Research, Estimates), Coca-Cola (KO: up $0.89 to $50.68, Research, Estimates) and United Technologies (UTX: up $1.97 to $93.52, Research, Estimates).
In other corporate news, business software maker Oracle (ORCL: up $0.42 to $13.12, Research, Estimates) rallied 3.3 percent and topped the Nasdaq's most-active list. The company reported quarterly earnings late Monday of 12 cents a share, a penny more than expected and two cents more than it earned a year earlier, due to gains in software license sales.
Oracle's strength wasn't typical of the Nasdaq's direction for most of the session, with the composite in negative territory until the last hour.
Semiconductor stocks remained weak, but closed off their worst levels, as typified by Applied Materials (AMAT: down $0.31 to $21.32, Research, Estimates), which recovered from a 3.5 percent decline to close with a loss of around 1.5 percent
Extreme Networks (EXTR: down $1.84 to $6.35, Research, Estimates) fell almost 22.5 percent in active Nasdaq trade, after the equipment gear maker warned that revenue in the current quarter, its fiscal second, will miss expectations.
The day's surge enabled investors to shrug off news that CALPers, the California Public Employees Retirement Systems fund, the biggest US pension fund, has filed a lawsuit against the New York Stock Exchange as well as seven specialist firms, charging broad trading abuses.
Economic news supports gains
Stocks initially rallied Monday, on news that former Iraqi leader Saddam Hussein had been captured by U.S. forces over the weekend. Although the gains gave way by the end of that session, the news was still seen as bullish for markets, analysts said.
Tuesday's economic news was also seen as largely bullish.
The consumer price index, a measure of prices paid by consumers, fell 0.2 in November after being unchanged in October. The "core" CPI, which excludes volatile food and energy prices, fell 0.1 percent after rising 0.2 percent in October. Economists surveyed by Briefing.com expected both to rise 0.1 percent.
The booming housing market continued to thrive in November, another report said, with housing start rising to a fresh record monthly high. Starts rose to a seasonally adjusted annual rate of 2.07 million units in November, a 4.5 percent increase from the previous month, when economists were expecting a decline. However, building permits, an indication of confidence in future sales, declined.
In addition, separate reports showed that industrial production, which measures production from factories, mines and utilities, rose at a faster pace in November than expected. Capacity utilization, which measure what percentage of production capacity factories used in the month, rose more than expected.
Treasury prices gained, pushing the yield on the 10-year note down to 4.22 percent. The dollar again hit fresh lows versus the euro and was weaker versus the yen.
NYMEX light sweet crude oil futures fell 29 cents to settle at $32.95 a barrel. COMEX gold fell $1.50 to settle at $408.40 an ounce.
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